She added the concept of an established Church was "occasionally misunderstood" and "commonly under-appreciated".

The Queen was accompanied by Prince Philip at the multi-faith reception.

The royal couple were greeted by the Archbishop of Canterbury, Dr Rowan Williams, before meeting representatives of the Baha'i, Buddhist, Hindu, Jain, Jewish, Muslim, Sikh, and Zoroastrian communities, as well as Christian representatives.

They each presented a treasured object or text of importance to their faith.

Media playback is unsupported on your device

Media captionThe Queen: "The concept of church is commonly under-appreciated"

The reception was one of the Queen's first public engagements to celebrate her Diamond Jubilee year.

Addressing the gathering, the Queen said the Church of England had "gently and assuredly" created an environment for other faith communities and people of no faith to live freely.

"Woven into the fabric of this country, the Church has helped to build a better society - more and more in active co-operation for the common good with those of other faiths."

Before the Queen's speech, Dr Williams drew laughter when he said the Queen had shown that being religious was "not eccentric or abnormal".

"On the contrary, if we take seriously the way our constitution works, the UK is a society where we might expect people to grasp the importance of symbols and traditions, not as a sign of mere conservatism or nostalgia but as a sign of what holds us together, what commits us to each other," he added.

The Queen is the Supreme Governor of the Church of England.

The link between state and Church also means 26 bishops sit in the House of Lords and clergy carry out numerous functions including the coronation.

BBC religious affairs correspondent Robert Pigott said the status of the Church has come under scrutiny in recent years but the Queen had given it a "robust defence" in her speech.

The Queen's remarks come a day after cabinet minister Baroness Warsi warned Britain was under threat from a rising tide of "militant secularisation".

Writing in the Daily Telegraph, the Muslim peer said religion was being "sidelined, marginalised and downgraded in the public sphere" and urged Europe to become "more confident and more comfortable in its Christianity".